Background Information
In this episode of the podcast, MicroStrategy founder Michael Saylor and Dave Portnoy delved into the investment value of Bitcoin. Saylor used sports metaphors to emphasize that Bitcoin is a fair "game" that allows everyone to participate and profit. He believes Bitcoin is not only a tool for wealth preservation but also an important asset for achieving economic empowerment.
Saylor also introduced the concept of "Cyber Newyork," comparing Bitcoin to the historical opportunity of buying real estate in Manhattan, emphasizing its importance in the digital economy. He suggested that investors allocate their assets wisely, including putting some money into Bitcoin, and reiterated the necessity of long-term holding.
Finally, Saylor responded to Elon Musk's idea of mining gold in outer space, believing there are more valuable resources waiting to be discovered in space. This discussion provided the audience with profound insights into Bitcoin's future role.
The game of Bitcoin and investment
Dave: We have a special guest today, welcome Michael Saylor, who just purchased 400,000 Bitcoins with your company, so I want to know what I misunderstood about Bitcoin?
Michael: I think we can use sports metaphors to discuss this issue. First, there are some games you cannot participate in; you can only watch. If you are just watching the game and the team wins, it means your season ticket will be more expensive next year. But there are some games you can participate in. You go to the casino to play games, but you know this game is against you. Some games are won by the casino, and you lose. Satoshi created a game that is favorable to individuals. Is he a real person? Satoshi is a real person, although he is no longer around. Do you know who that person is? We are all Satoshi now, Dave.
The most important thing is that, just as Prometheus gave us fire, Satoshi Nakamoto gave us a game that we can all win. Bitcoin is that game. You know, there are some things you don't want to do on a network that can censor what you say and freeze your accounts.
Bitcoin is a currency network that does not censor the money you send or freeze your account. Its design means that over time, you are winning this game. I think if you have a basketball team with LeBron James, Michael Jordan, and their digital versions, they can compete forever, and you can play alongside them.
When they score 100 points and you score 2, but you all become rich together, everyone wins together. This is what Bitcoin looks like. Anyone can participate. Wherever I go, there is a fan base. In this process, not only do you win the game, but you also become wealthy in the process of winning.
Motivation for Bitcoin investment
Dave: This description is interesting; we’ve talked a bit about it outside. I always hear Bitcoin supporters say they buy Bitcoin because they believe it benefits humanity, that it's not just about making money but about the greater good. I’m clear that I stand on the side of making money. By the way, I believe I will eventually understand your point of view. I think Bitcoin has become too big to fail. Too many people are involved, which is why it interests me so much. So, when you invest so heavily, I think you mentioned that you almost own the most Bitcoin in the world after BlackRock. Could you give a percentage that, as a good investment, financially makes sense compared to saving humanity? How do you divide that? Do you think this is the best investment in my opinion, or is this a moral decision?
Michael: I think both. I believe we have to play the game of life, and half of life is economic. So whether you like it or not, you have to participate in the economic game. You could put money in a bank in Lebanon using Lebanese currency. If the government inflates the currency and the bank freezes your assets, you fail.
In the game of life, you can put your money in any assets in Africa or put your money in Bitcoin. Therefore, the real appeal of Bitcoin is that no one in the world wants to put money in a bank of an African currency you’ve never heard of. But Bitcoin allows you to take control of your money. Is this equal? Is it humanitarian? Of course. Is it economically smart? The two are connected. If you want to achieve any goal in life, you must have economic empowerment. To achieve economic empowerment, you must be on a network that won’t freeze you or censor you, and you must have an asset that no one else can devalue, that no company can mess up, that no country can mess up, and that is what Bitcoin represents.
"Cyber Newyork" analogy and the investment value of Bitcoin
Dave: Michael gave me a new analogy before the show started, one I had never heard of or thought of before. He mentioned "Cyber Newyork," which is about buying property online. If you could have purchased real estate in New York in the 1600s and then sold it, how valuable would that have been? What I find interesting is that not everyone can easily buy "Cyber Newyork," but when we talk about Bitcoin, that's actually what we're referring to. Could you explain this analogy a bit more?
(Deep Tide Note: "Cyber Newyork" is a metaphor used to describe the concept of owning scarce assets in the digital world (especially on the internet). This analogy mainly compares digital assets like Bitcoin with historical investment opportunities in New York real estate, emphasizing the value and potential of owning scarce assets in the digital world, just like owning New York real estate in history. This comparison helps people understand the investment opportunities and importance of digital assets like Bitcoin.)
Michael: I believe that in some places, land values will soar. If we stand on land in Miami now, the past price was $10,000 per acre, and the current price is $10 million to $20 million per acre. In less than 100 years, it has increased 1,000 times. The same goes for the Hamptons and Manhattan. I grew up in Fairborn, Ohio. The land in Fairborn hasn’t increased 1,000 times. Swampland or land in the Rockies won’t appreciate.
So if I gave you a chance to buy all the land in Palm Beach, the Hamptons, or Manhattan over the past 100 years, that would be a good deal. In fact, in 1650, you could buy land in Manhattan every ten years, and the price was always higher than what the seller paid for it, which was still a good investment. The only thing that slightly slows you down is property tax. But if we assume there are no property taxes, you would buy and hold forever.
Now, if you're African, South American, Russian, or Chinese, it's not easy to buy land in the U.S. You wouldn't want to own land in Africa, just as you wouldn't want to own land in the middle of the Rockies; it won’t appreciate.
Bitcoin is like the "Manhattan" of the internet, with a total supply of 21 million. All the wealthy people in the world would want to invest a portion of their wealth in it. So how much would they invest? If you currently live in Lebanon, Iraq, or Syria, the wealth you hold in Bitcoin is safe, while your deposits in local banks may face risks.
If you need to leave a country or escape a crisis, this happens often. In that case, you can retain the wealth you hold in Bitcoin, while land, buildings, local currency, or bank deposits may be at risk of loss. Therefore, Bitcoin actually represents the most powerful and greatest city in cyberspace, which will become the center of the digital economy in the future.
Interestingly, when you bought one or more blocks of Manhattan in the 19th century, you might not have known how people would use that land, but you could imagine smart people flocking to New York, eager to own that land to build buildings. Just by holding that land, you might have become wealthy.
The decision-making and psychological journey of Bitcoin investment
Dave: You are actually Michael Jordan; you are the Jordan in this analogy. If you buy Bitcoin, MicroStrategy, you are buying continuously and will never stop buying.
Michael: I would buy it for $1 million, and I might buy it at a rate of $1 billion a day at a price of $1 million because that’s what I do. You know, Manhattan real estate in 1930 was really expensive, the prices in 1930 were much higher than in 1830. I said: Well, you know, 100 years from now, we will still be buying, and we will pay more. The only question is whether you can hold it over that time period.
Dave: Since you really got involved with Bitcoin, especially during the Covid pandemic in 2020, have you ever had doubts, like 'Did I choose wrong?' Or have you always been steadfast, or thought, 'If I’m wrong, I’ll go bankrupt?'
Michael: In March 2020, we all experienced a significant shock. During that time, I often thought, 'Should I move to Miami? Should I enter the stock market? Should I buy Bitcoin? What should I do?' For about six months, I struggled to figure these things out and ultimately discovered Bitcoin. While investing in Bitcoin is not without risks, the risks of other options are comparatively greater, potentially leading to either rapid or slow death. Therefore, over the next four years, I decided to take some new actions to gradually reduce risk. The government views Bitcoin as a commodity, which eliminates one risk factor. Next, the launch of ETFs eliminated a second risk factor. Later, support from the Trump administration brought down a third risk factor. Then MicroStrategy bought $250 million worth of Bitcoin at $11,800, but the price subsequently dropped by 20%. In the following week and a half, we lost $40 million.
Dave: What do you do when that happens? How do you handle it?
Michael: I'm thinking about how to buy the next $250 million. Because I’m already involved. Once you commit, you can’t back out. I decided I want to win; I know if I don’t participate in this game, I will definitely lose. So that time was indeed tough. But then Bitcoin rebounded, breaking through historical highs again. From August 2020 to about a month ago, we raised $10 billion because everyone supported us, we had a strategy, and we committed to it. Then, during the red tide in November, we raised $15 billion in four and a half weeks to buy more Bitcoin.
So now, we've invested $25 billion in this network. But you know, deciding what to do, focusing, committing, but in the process, you'll get slapped in the face and experience some setbacks.
Views on Bitcoin investment advice and other investment opportunities
Dave: Suppose you are my financial advisor. If my net worth is $100 million, what percentage should I invest in Bitcoin? I have 14 Bitcoins, which is just a small part of my assets, and I don’t need that money for ten years.
Michael: I would suggest you divide your funds into several parts, investing in scarce and popular real estate you want to live in. This way, you will love the place. Then, I suggest putting a portion of the funds into a large tech stock portfolio, maybe the "great seven" (Note: usually refers to the seven largest tech companies by market capitalization globally, including: Apple, Microsoft, Amazon, Google, Facebook, Tesla, NVIDIA) or other stocks you like. Next, you can set aside a portion of perhaps 10%, 20%, or 30% to buy digital assets, like Bitcoin. About 2% can be seen as an insurance policy; you won’t get rich just because of home flood insurance; 10% is a participant's ratio, while 20% or 30% could yield significant returns. Of course, if you are a staunch supporter of Bitcoin, you can also raise the ratio to 50% or 75%. But in that case, you would really be focused on Bitcoin investment.
Dave: Many people ask me this question, and I have asked many people too. Do you only invest in Bitcoin? What do you think about other cryptocurrencies? We know your views on Bitcoin, but what about the other coins and everything that’s happening?
Michael: My perspective is that Bitcoin is a protocol asset without an issuer. Regarding other investments, I think that building might be worth buying, that Picasso might be priced right, and buying some Nvidia stock might also be a good choice. These are countless investment opportunities, and you have to become an expert. If you have the expertise to participate in these investments, then you should. I have no negative views on these investments.
But I want to emphasize that if you just want to hold a portion of your funds long-term and not worry about the future, what you need is a globally dominant economic agreement or capital agreement, which is Bitcoin. Therefore, I think of Bitcoin as a way of saving. I just want to preserve my money without external interference, while all other investments are games you, as an investor, are playing, and you need to make your own decisions.
The role of MicroStrategy
Dave: MicroStrategy is a Bitcoin company; do you watch Bitcoin's charts every day? What is a day in MicroStrategy like?
Michael: Many investors around the world cannot buy Bitcoin. For instance, in the UK, they are not allowed to invest in Bitcoin in retirement accounts. Therefore, they need to buy stocks of companies. Sometimes people buy our stocks because they have to invest in some company and cannot buy Bitcoin directly. So, some people choose to buy our stock precisely for this reason.
Some investors are bond investors who want upside potential but do not want to bear downside risk. So how can one gain the upside potential of Bitcoin while having downside protection? I need bonds issued by a company that is completely related to Bitcoin. If Bitcoin crashes 90% tomorrow, the bonds will still pay interest. But if you bought $100 million of Bitcoin and it crashes, you will lose $90 million. So, some people wish to gain upside potential while enjoying downside protection.
What MicroStrategy does is provide bonds and stocks. Additionally, our stock's volatility is twice that of Bitcoin, and it typically outperforms Bitcoin. There are many speculative hot money investors and options traders who want 10x leverage. They might not want to buy Bitcoin directly, or they want to sell call options 30 days later, paying 200% interest. Therefore, many traders have their own strategies, and in regulated exchanges in the U.S., there is not a single publicly traded company that can implement these strategies.
Thus, MicroStrategy has become a bridge between traditional capital markets and the global offshore crypto economy. We provide people with this high-volatility asset, whether it's 2x, 0.5x, or 10x leverage; this is an interesting business.
Views on Elon Musk
Dave: Last question, will Elon Musk reach outer space and mine gold from there, then bring it down to Earth in abundance, or is this just nonsense?
Michael: He will reach outer space. But when he gets there, he won’t be mining gold because the value of gold won’t be that high; there will be many more valuable things to discover in outer space.
Advice on investment timing
Dave: When you mention 100 years, is 10 years long enough to invest?
Michael: If you plan to hold your capital for 10 years, then Bitcoin is a good choice. I think the minimum holding period should be four years. Bitcoin's current price is $100,000. No one has lost money buying Bitcoin, and no one has made money shorting Bitcoin. So, if you are looking for returns in four months, four weeks, or four days, you might feel anxious. If you have four years, you will be fine. If you can hold for ten years, you will look like a genius. Therefore, my advice is to join the Bitcoin bandwagon.
Host Summary
Dave: Michael owns 400,000 Bitcoins, and I find that a bit shocking. I have never met someone like that. He mentioned he really likes the analogy of cyber real estate; you can buy real estate, it will always appreciate, and not everyone can buy real estate in these prime areas, but anyone can buy Bitcoin. I like that perspective; it resonates with me and makes a lot of sense. Supporting a sports team is exactly how I feel about Bitcoin.
I believe in Bitcoin, not because I believe in all the different moral visions or egalitarianism; I don't believe in that. I believe people will become wealthy. That’s what he said: support your team. You will have people like Michael who will continuously buy Bitcoin. Additionally, there are other stocks; he mentioned that like the S&P 500 to some extent is the same. If you buy stocks, they always go up; that's the first rule of traders.
This article is a collaborative reprint from: Deep Tide
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